EU internal market and services Commissioner Michel Barnier will today ask member states and the European Parliament to enact new, EU-wide, consumer standards to prevent consumers across the EU from being sold investment and insurance products, including pension plans, that are not right for them.
The EU’s packaged retail investment products (Prips)
Initiative will, if adopted, require every institution offering investment products, including investment fund managers, insurers and banks, to produce a concise ’Key Information Document’ (KID) for each product.
Each KID will provide information on the product’s main features, as well as straightforward information on the risks and costs. The KID will make clear to every consumer whether or not they could lose money.
The KIDs will follow a common standard, and will be required for private pensions, all types of investment funds, insurance-based investments and retail structured products.
The proposed revision of the Insurance Mediation Directive (IMD)
Will see an upgrading of consumer protection by creating common standards across insurance sales and ensuring proper advice. The EU wants to see the same level of consumer protection to apply whether a consumer purchases a product directly from an insurance company or from an intermediary. The current IMD only covers sales by intermediaries.
Consumers will be given clear information about the professional status of the person selling the insurance product under the proposals. There will be more effective rules to tackle conflicts of interest, including disclosing how sellers are remunerated.Andinsurance sales will have to be accompanied by honest professional advice, the EU says.
The EU says in future it will be easier for intermediaries to operate cross-border, thus promoting a real single market in insurance and more choice and lower prices for consumers.
Barnier also wants new rules for Undertakings for Collective Investment in Transferable Securities (Ucits) to prevent Madoff-style scandals. These comprise a precise definition of the tasks and liabilities of all depositaries acting on behalf of a Ucits fund, clear rules on the remuneration of Ucits managers to avoid excessive risk-taking and a common approach to how core breaches of the UCITS legal framework are sanctioned that introduces common standards on the levels of administrative fines so as to ensure they always exceed potential benefits from breaches of the rules.
